CHINA’S COPYCAT ECONOMY – GETTING PASTED FINALLY!

Maybe Trump’s trade wars with China are helping some bit of China for the better?

In fact Trump had justified the imposition of tariff on Chinese imports on grounds of stealing Intellectual Property (IP) from America. Right from counterfeiting famous brands, with a  mall tweak in the spelling and stealing trade secrets, pressurizing companies to share technology with local company to get access to Chinese markets, the Chinese ways of trade have infuriated the foreign investors. Many are wary of doing business there.

A recent example is of a European firm which sells conveyor belts for fruit industry. A Chinese firm wanted to buy this product for their farms in China but the European manufacturers refused to sell as they feared once the belt goes there, millions of counterfeit belts will be produced locally, and the European company could eventually get wiped out!

We ourselves have come across millions of such counterfeit Chinese products, right from watches, Apple me-too’s, mobiles, handbags, clothes and even ads, cartoons, everything which any big brand makes in the world. A Chinese will buy one product and take it home; soon he will dismantle everything, learn all the nuances and finally make enough fakes to flood the world. The original maker will be left fuming, left fighting a futile legal battle in China. There is a joke on this – Three countries were competing on making the thinnest needle. America designed the product. Germany produced it. China engraved on it, ‘Made in China!’ Sounds a little cruel but this is how blasé the Chinese manufacturers have become. So much so that even cars are copied, exactly as they are. Companies spend millions of rupees and years to design a model or discover a new product – China just copies this hard word.

Thus protection of IP in China has become a contentious. This comes to the fore because recently Tata Motors won the JLR case against Evoque copy case in the Chinese courts. The court concluded that Evoque has five features copied directly in ‘Landwind X7’ built by Jiangling Motor Corp, which had led to widespread consumer confusion.  Jiangling Landwind X7 SUV had a similar shape to that of JLR Evoque SUV, with the roof and windows tapering from front to back. The X7 also had near-identical tail lights and character lines on the side panelling.

This is a very significant win as earlier too, the likes of GM, BMW, Toyota, Merc, all have taken Chinese manufacturers to court for being copy cats but this is the first time ever that the Chinese Courts have actually admitted to the copy, with a foreign company wining the case.  Only other two foreign companies to win an IP case were Lego and New Balance.

But it looks like China is taking this IP issue pretty seriously, only now.  Though it has copyright laws in place for the past over 35 years or so, it is now that there is swift progress. China now has a specialist IP court though at the end of the day, it remains a ‘yes man’ to the ruling Communist Party. Cases are supposed to be settled in 12 to 18 months – that too lags.

This is changing because it is facing pressure not just from foreign firms but also from local manufacturers whose innovations get promptly copied. If the Govt does not move to correct this, the very hallmark of its growth, innovation and entrepreneurship will continue to remain under the cloud of ‘copycat’ economy.

President Xi recently approved new rules for foreign investors wherein there was a very significant change - transfer of technology from foreign investors to any domestic partner must be voluntary. That’s a huge change! And though we detest saying it, Trump played a big part in getting this through with his tariffs.

Enforcement will continue to remain an issue but the only solace is that finally the Chinese Govt is waking up to the copycat eating away its own economy.